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'Sharing economy' gets a boost in California

The so-called sharing economy, in which people rent out their cars, homes and time through smartphones, got a boost Thursday after California approved ride-sharing services like UberX, Lyft and Sidecar

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SAN FRANCISCO -- The so-called sharing economy, in which people rent out their cars, homes and time through smartphones, got a boost Thursday after California authorities approved ride-sharing services including UberX, Lyft and Sidecar.

The California Public Utilities Commission cleared a plan that regulates ride-sharing firms like these as a Transportation Network Company, or TNC. This applies to companies that provide pre-arranged transportation services for money through an app or platform that connects passengers with drivers using personal vehicles.

To qualify for the new TNC status, ride-sharing firms have to comply with 28 requirements, including criminal background checks for drivers, setting up driver-training programs and $1 million worth of commercial liability insurance.

"Our decision emphasizes safety as a primary objective, while fostering the development of this nascent industry," said CPUC Commissioner Mark Ferron. "We have specified our expectations for the attributes of insurance. Now the insurance market will determine the best approach to ensure that there is coverage for passengers, drivers, and third-parties at all times while these vehicles are operating on a commercial basis."

The decision is a big win for ride-sharing companies and their backers, which include some of the largest technology companies and venture capital firms.

Google Ventures invested more than $250 million in Uber, operator of UberX, in August, valuing the start-up at over $3.5 billion.

Lyft is backed by Andreessen Horowitz, the venture capital firm run by Marc Andreessen and Ben Horowitz, while Sidecar is also backed by Google Ventures and other VC firms.

These services, and similar ones in different categories such as Airbnb, have become very popular. But they have operated in legal limbo as established industries, such as the taxi and hotel sectors, challenged their status in the courts.